Performance Summary
Unaudited Financial Results
For the First Quarter ended
31 March 2009
DBS Group Holdings Ltd
Contents
Page
Overview 2
Net Interest Income 4
Net Fee and Commission Income 5
Other Non-Interest Income 5
Expenses 6
Allowances for Credit and Other Losses 7
Performance by Business Segments 8
Performance by Geography 11
Customer Loans 13
Non-Performing Assets and Loss Allowance Coverage 14
Funding Sources 17
Customer Deposits 18
Other Borrowings & Liabilities 18
Value at Risk and Trading Income 19
Capital Adequacy 20
Unrealised Valuation Surplus/(Losses) 20
Unaudited Consolidated Income Statement 21
Unaudited Consolidated Statement of Comprehensive Income 21
Unaudited Balance Sheets 22
Unaudited Consolidated Statement of Changes in Equity 23
Unaudited Statement of Changes in Equity 23
Unaudited Consolidated Cash Flow Statement 24
Additional Information
Issuance of Ordinary Shares 25
Adoption of New or Revised FRS and INT FRS 25
Disclosure on Certain Financial Instruments 26
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
OVERVIEW
DBS Group Holdings Ltd (“DBSH”) prepares its condensed consolidated DBSH Group (“Group”) interim financial statements in accordance with Singapore Financial Reporting Standard (“FRS”) No. 34 Interim Financial Reporting, as modified by the requirements of Notice to Banks No. 612 “Credit Files, Grading and Provisioning” issued by the Monetary Authority of Singapore. The accounting policies and methods of computation applied for the current financial periods are consistent with those applied for the financial year ended 31 December 2008, with the exception of the adoption of new or revised FRS and Interpretations to FRS (“INT FRS”).
On 1 January 2009, the Group adopted the following new or revised FRS and INT FRS that are issued by the Accounting Standard Council (ASC), and are relevant for the Group.
• FRS 1: Presentation of Financial Statements
• FRS 1 Presentation of Financial Statements & FRS 32 Financial Instruments: Presentation – Puttable Financial Instruments and Obligations Arising on Liquidation
• FRS 27: Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
• FRS 102 Share-based Payments – Vesting Conditions and Cancellations
• FRS 107 Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments • FRS 108: Operating Segments
• Improvements to FRSs (where applicable) • INT FRS 113: Customer Loyalty Programmes
• INT FRS 116: Hedges of a Net Investment in a Foreign Operation
Refer to page 25 for more information.
1st Qtr
Selected income statement items ($m)
Net interest income 1,076 1,057 2 1,115 (3)
Net fee and commission income 317 353 (10) 263 21
Other non-interest income 269 153 76 93 >100
Total income 1,662 1,563 6 1,471 13
Expenses 638 656 (3) 689 (7)
Profit before allowances 1,024 907 13 782 31
Allowances for credit and other losses 414 140 >100 269 54
Profit before tax 630 790 (20) 523 20
Net profit 456 603 (24) 383 19
One-time items 1/ (23) - NM (88) 74
Net profit including one-time items 433 603 (28) 295 47
Selected balance sheet items ($m)
Customer loans 2/ 130,557 114,227 14 126,481 3
Interbank assets 3/ 30,261 28,606 6 22,159 37
Total assets 273,252 251,453 9 256,718 6
Customer deposits 4/ 179,818 157,379 14 169,858 6
Total liabilities 244,923 227,996 7 232,715 5
Shareholders’ funds 24,042 20,850 15 19,819 21
Key financial ratios (%) (excluding one-time items) 5/
Net interest margin 1.99 2.09 2.04
Non-interest/total income 35.3 32.4 24.2
Cost/income ratio 38.4 42.0 46.8
Return on assets 0.69 0.99 0.59
Return on equity 6/ 8.01 11.61 7.64
Loan/deposit ratio 72.6 72.6 74.5
NPL ratio 2.0 1.0 1.5
Specific allowances (loans)/average loans (bp) 70 13 69
1st Qtr
– earnings excluding one-time items and goodwill 0.85 1.34 0.85
– earnings 0.84 1.34 0.80
– net book value 6/ 10.27 10.71 10.25
Per diluted share
– earnings excluding one-time items and goodwill 0.83 1.29 0.82
– earnings 0.82 1.29 0.78
– net book value 6/ 10.10 10.59 10.14
Notes:
1/ One-time items include restructuring costs, impairment charges for Thai investment and gains on sale of office buildings in Hong Kong 2/ Includes customer loans classified as financial assets at fair value through profit or loss on the balance sheet
3/ Includes interbank assets classified as financial assets at fair value through profit or loss on the balance sheet 4/ Includes customer deposits classified as financial liabilities at fair value through profit or loss on the balance sheet
5/ Return on assets, return on equity, specific allowances (loan)/average loan and per share data for the quarters are computed on an annualised basis 6/ Minority interests are not included as equity in the computation of net book value and return on equity
7/ Adjusted for shares arising from the rights issue in January 2009 NM Not Meaningful
First-quarter net profit rose 19% from the previous quarter to $456 million but was 24% below a year ago. The performance was marked by strong revenues and productivity savings through cost discipline measures. Earnings before allowances reached a record $1.02 billion for the first quarter. Additional general allowances were taken to further bolster the balance sheet against economic uncertainties in the operating environment.
Revenues rose 6% from a year ago and 13% from the previous quarter to $1.66 billion as trading income improved from earlier periods. Net interest income rose 2% from a year ago and fell 3% from the previous quarter as lower interbank rates dampened net interest margins, but this was partially offset by higher credit spreads and wider prime-Hibor spreads in Hong Kong. Net fee income rose 21% from the previous quarter on better loan related revenues, but was 10% below a year ago as capital market activities remained weak.
Expenses fell 7% from the previous quarter and 3% from a year ago as ongoing efforts to improve workflow and productivity yielded savings, partially offset by continued investments in systems infrastructure and in operations outside Singapore and Hong Kong. The cost-income ratio fell to 38% from 47% in the previous quarter and 42% a year ago.
Allowances rose to $414 million, 54% above the previous quarter and three times the amount a year ago. They included specific loan allowances of $225 million or 70 basis points of average loans, which were stable from the previous quarter but significantly above the 13 basis points a year ago. The increased charges were for SME loans in Hong Kong and corporate loans in Rest of the World. The non-performing loan rate rose from 1.5% to 2.0%.
Balance sheet strength was maintained. The total capital adequacy ratio stood at 16.7% with tier-1 at 12.5%. Total cumulative allowances amounted to 97% of non-performing assets and 156% if collateral was considered.
Return on assets was 0.69% compared to 0.59% in the previous quarter and 0.99% a year ago. Return on equity improved to 8.0% from 7.6% in the prior quarter but fell from 11.6% a year ago.
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
NET INTEREST INCOME
1st Qtr 2009 1st Qtr 2008 4th Qtr 2008
Customer loans 128,695 1,107 3.49 111,027 1,308 4.74 128,582 1,335 4.13
Interbank assets 41,384 107 1.05 38,219 258 2.72 38,675 164 1.69
Securities 49,044 441 3.65 54,256 581 4.31 49,801 517 4.13
Total 219,123 1,655 3.06 203,502 2,147 4.24 217,058 2,016 3.69
Interest-bearing liabilities
Customer deposits 175,464 387 0.90 154,445 673 1.75 170,719 654 1.52
Other borrowings 28,227 192 2.76 39,979 417 4.19 34,228 247 2.87
Total 203,691 579 1.15 194,424 1,090 2.26 204,947 901 1.75
Net interest
income/margin 1/ 1,076 1.99 1,057 2.09 1,115 2.04
Note:
1/ Net interest margin is net interest income expressed as a percentage of average interest-earning assets
Net interest income fell 3% from the previous quarter to $1.08 billion as interest margins declined five basis points to 1.99%. Average asset volumes were little changed.
The lower margins were due largely to a fall in Singapore interbank rates. The inflow of funds from the equity rights issue that closed in January and from customer deposits also exerted some margin pressures, but the impact was largely offset by managing down other forms of funding.
Partially offsetting these pressures were higher credit spreads and an improvement in Hong Kong margins as the prime-Hibor spread widened.
Compared to a year ago, net interest income was 2% higher as the impact of higher customer loans was offset by lower margins due primarily to lower Singapore interbank rates.
1st Qtr 2009 versus 1st Qtr 2008 1st Qtr 2009 versus 4th Qtr 2008
Volume and rate analysis ($m)
Increase/(decrease) due to change in Volume Rate Net change Volume Rate changeNet
Interest income
Customer loans 204 (370) (166) 1 (205) (204)
Interbank assets 23 (196) (173) 12 (66) (54)
Securities (56) (79) (135) (8) (58) (66)
Total 171 (645) (474) 5 (329) (324)
Interest expense
Customer deposits 92 (374) (282) 18 (276) (258)
Other borrowings (124) (99) (223) (41) (10) (51)
Total (32) (473) (505) (23) (286) (309)
Net impact on interest income 203 (172) 31 28 (43) (15)
Due to change in number of days (12) (24)
NET FEE AND COMMISSION INCOME
Net fee and commission income rose 21% from the previous quarter to $317 million. This was due primarily to higher revenues from loan related activities as market opportunities were captured.
Capital market activities – comprising stockbroking, investment banking, wealth management product sales and fund management – remained subdued and were at previous quarter’s level.
Compared to a year ago, fee income was 10% lower from a decline of revenues from capital market activities, partially offset by higher revenues from activities outside of capital markets.
OTHER NON-INTEREST INCOME
($m) 1st Qtr
Net (loss)/income from financial instruments
designated at fair value (54) 85 NM (169) 68
Net income on financial investments 106 211 (50) 104 2
Net gain on fixed assets1/ - 3 NM - -
Others (include rental income) 13 15 (13) 14 (7)
Total 269 153 76 93 >100
Notes:
1/ Exclude one-time items NM Not Meaningful
Other non-interest income rose from $93 million in the previous quarter to $269 million, boosted by gains from trading activities.
Trading activities registered a gain of $150 million. The improvement was led by interest rate and foreign exchange activities supported by strong customer flows.
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
EXPENSES
($m) 1st Qtr
2009
1st Qtr 2008
% chg 4th Qtr
2008
% chg
Staff 1/ 327 352 (7) 346 (5)
Occupancy 71 58 22 68 4
Computerisation 112 102 10 126 (11)
Revenue-related 33 34 (3) 35 (6)
Others 95 110 (14) 114 (17)
Total 638 656 (3) 689 (7)
Staff headcount at period-end 14,082 14,082 - 14,312 (2)
Included in the above table were:
Depreciation of properties and other fixed assets 41 34 21 36 14
Director’s fees 1 1 - 1
-Audit fees payable 2 2 - 2
-Note:
1/ Exclude one-time items
Expenses fell 7% from the previous quarter to $638 million. Expenses declined as ongoing efforts to improve productivity yielded cost savings, partially offset by continued investment for technology improvements and emerging markets.
Staff costs declined 5% as headcount fell 2% during the quarter due to a fall in the number of contract staff hired for seasonal activities. The reduction in staff costs was also due to the full quarter impact of an organisational streamlining in the previous quarter.
Non-staff costs were 9% lower compared to previous quarter and 2% higher compared to a year ago. Cost discipline will continue to be exercised and investments will be made where there are revenue opportunities.
ALLOWANCES FOR CREDIT AND OTHER LOSSES
($m) 1st Qtr
2009
1st Qtr 2008
% chg 4th Qtr
2008
% chg
General allowances (GP) 182 90 >100 46 >100
Specific allowances (SP) for loans 225 37 >100 224
-Singapore 64 23 >100 67 (4)
Hong Kong 93 15 >100 111 (16)
Other countries 68 (1) NM 46 48
Specific allowances (SP) for securities, properties
and other assets 1/
7 13 (46) (1) NM
Total 414 140 >100 269 54
Notes:
1/ Exclude one-time items NM Not Meaningful
Specific allowances for loans amounted to $225 million, little changed from the previous quarter.
In Hong Kong, specific loan allowances fell from $111 million in the previous quarter to $93 million. There were higher charges for SME loans but the increase was more than offset by a sharp decline in charges for private banking loans. Charges for Hong Kong SME loans are expected to remain at elevated levels.
The increase in specific loan allowances in other countries was due to corporate loans in Rest of the World. Specific allowances for corporate and SME loans in Rest of Greater China declined from the previous quarter as the credit environment improved.
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
PERFORMANCE BY BUSINESS SEGMENTS
($m)
CBG IBG GFM CTU
Central
Ops Total
Selected income items 1st Qtr 2009 1/
Net interest income 192 467 287 173 (43) 1,076
Non-interest income 113 286 101 130 (44) 586
Total income 305 753 388 303 (87) 1,662
Expenses 238 178 120 11 91 638
Allowances for credit and other losses 10 198 7 50 149 414
Share of profits of associates - - 1 - 19 20
Profit before tax 57 377 262 242 (308) 630
Income tax expense 9 88 59 36 (77) 115
Net profit 48 289 203 206 (290) 456
4th Qtr 2008 1/
Net interest income 243 482 309 177 (96) 1,115
Non-interest income 125 200 (159) 98 92 356
Total income 368 682 150 275 (4) 1,471
Expenses 258 164 65 (3) 205 689
Allowances for credit and other losses 12 145 14 4 94 269
Share of profits of associates - - - - 10 10
Profit before tax 98 373 71 274 (293) 523
Income tax expense 17 76 43 38 (97) 77
Net profit 81 297 28 236 (259) 383
1st Qtr 2008
Net interest income 326 396 325 130 (120) 1,057
Non-interest income 160 278 (20) 40 48 506
Total income 486 674 305 170 (72) 1,563
Expenses 255 192 132 13 64 656
Allowances for credit and other losses 5 91 23 13 8 140
Share of profits of associates - - 2 - 21 23
Profit before tax 226 391 152 144 (123) 790
Income tax expense 38 76 49 20 (32) 151
Net profit 188 315 103 124 (127) 603
Selected balance sheet and other items 2/
31 Mar 2009
Total assets before goodwill 37,407 100,493 91,310 32,350 5,845 267,405
Goodwill on consolidation 5,847
Total assets 273,252
Total liabilities 101,680 63,392 49,734 2,898 27,219 244,923
Capital expenditure for 1st Qtr 2009 4 5 3 - 37 49
Depreciation for 1st Qtr 2009 11 4 3 - 23 41
($m)
CBG IBG GFM CTU
Central
Ops Total
31 Dec 2008
Total assets before goodwill 36,004 96,586 86,760 26,344 5,177 250,871
Goodwill on consolidation 5,847
Total assets 256,718
Total liabilities 95,537 60,390 48,930 1,496 26,362 232,715
Capital expenditure for 4th Qtr 2008 32 7 3 - 12 54
Depreciation for 4th Qtr 2008 6 3 2 - 25 36
Goodwill charge for 4th Qtr 2008
-31 Mar 2008
Total assets before goodwill 32,874 87,995 91,445 28,734 4,564 245,612
Goodwill on consolidation 5,841
Total assets 251,453
Total liabilities 85,003 56,564 58,315 1,837 26,277 227,996
Capital expenditure for 1st Qtr 2008 5 3 1 - 5 14
Depreciation for 1st Qtr 2008 7 2 3 - 22 34
Goodwill charge for 1st Qtr 2008
-Notes:
1/ Expenses, allowances for credit and other losses and profits exclude one-time items
2/ Refer to sections on Customer Loans and Non-Performing Assets and Loss Allowance Coverage for more information on business segments
The business segment results are prepared based on the Group’s internal management reporting which reflects the organisation management reporting structure. As the activities of the Group are highly integrated, internal allocation has been made in preparing the segment information. Amounts for each business segment are shown after the allocation of certain centralised costs, funding income and the application of transfer pricing, where appropriate. Transactions between segments are recorded within the segment as if they are third party transactions and are eliminated on consolidation.
The various business segments are described below:
Consumer Banking (CBG)
CBG provides individual customers with a diverse range of banking and related financial services. The products and services available to customers include current and savings accounts, fixed deposits, loans and home finance, cards, payments and investment products.
CBG’s net interest income fell 21% from the previous quarter and 41% from a year ago as short-term interbank rates in Singapore declined to recent lows. Interbank rates also fell in Hong Kong and in other parts of Asia where CBG has operations in. Non-interest income was lower than both comparative periods due mainly to lower wealth
management product sales in Singapore and Hong Kong. Expenses fell 8% from the previous quarter and 7% from a year ago due to productivity gains in core markets, partially offset by investments in Indonesia, China and Taiwan. Allowances were little changed from the previous quarter as the credit quality of consumer loans remained healthy. Allowances were higher compared to a year ago due to a mixture of higher allowances and lower recoveries.
Institutional Banking (IBG)
IBG provides financial services and products to large corporate, institutional clients and small and medium-sized businesses. The products and services available to customers include corporate finance and advisory banking services for mergers and acquisitions, capital raising through debt and equity markets, capital
restructuring, syndicated finance, securities and fiduciary services, cash management and trade services, private equity and credit facilities, deposit and treasury products.
IBG’s net interest income was higher than a year ago from higher loan volumes and interest spreads but declined from the previous quarter as lower interbank rates lowered loan yields. Non-interest income compared positively against previous quarter from higher income from fee-based activities and sales of treasury products. In line with increased customer volumes, operating expenses were higher than the previous quarter. Total allowances were higher than the previous quarter due to higher charges for the SME portfolio in Hong Kong and for the corporate portfolio in Rest of the World.
Global Financial Markets (GFM)
GFM provides treasury services to corporations, institutional and private investors, financial institutions and other market participants. It is primarily involved in market making, structuring, equity and debt sales and trading across a broad range of financial products including foreign exchange, interest rate/credit/equity and other structured derivatives. Income from these financial products and services offered to the customer of other business segments, such as
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
securities custodian services and distribution of primary and secondary issues.
GFM’s net interest income declined while non-interest income recovered from losses in both comparative periods. Interest rate and foreign exchange activities continued to record gains in the first quarter. Expenses were higher compared to the previous quarter as staff costs increased in line with higher revenues.
Central Treasury Unit (CTU)
CTU is responsible for the management of the Group’s asset and liability interest rate positions and investment of the Group’s excess liquidity and shareholders’ funds.
Central Operations
PERFORMANCE BY GEOGRAPHY
($m)
S’pore
Hong Kong
Rest of Greater China
South and South-east Asia
Rest of
world Total
Selected income items 1st Qtr 2009 1/
Net interest income 655 224 80 73 44 1,076
Non-interest income 304 127 37 82 36 586
Total income 959 351 117 155 80 1,662
Expenses 375 150 60 41 12 638
Allowances for credit and other losses 226 88 12 34 54 414
Share of profits of associates 3 - 3 14 - 20
Profit before tax 361 113 48 94 14 630
Income tax expense 43 19 9 31 13 115
Net profit 259 94 39 63 1 456
4th Qtr 2008 1/
Net interest income 743 221 71 44 36 1,115
Non-interest income 93 114 55 59 35 356
Total income 836 335 126 103 71 1,471
Expenses 368 205 65 34 17 689
Allowances for credit and other losses 101 112 40 13 3 269
Share of profits of associates 6 - - 4 - 10
Profit before tax 373 18 21 60 51 523
Income tax expense 28 2 (2) 24 25 77
Net profit 282 16 23 36 26 383
1st Qtr 2008
Net interest income 721 225 41 41 29 1,057
Non-interest income 247 177 36 40 6 506
Total income 968 402 77 81 35 1,563
Expenses 401 173 34 34 14 656
Allowances for credit and other losses 97 19 12 7 5 140
Share of profits of associates 3 - 2 18 - 23
Profit before tax 473 210 33 58 16 790
Income tax expense 90 30 8 14 9 151
Net profit 347 180 25 44 7 603
Selected balance sheet items 2/ 31 Mar 2009
Total assets before goodwill 180,978 46,173 14,438 12,898 12,918 267,405
Goodwill on consolidation 198 5,649 - - - 5,847
Total assets 181,176 51,822 14,438 12,898 12,918 273,252
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
Total assets before goodwill 170,132 44,119 16,563 9,889 10,168 250,871
Goodwill on consolidation 198 5,649 - - - 5,847
Total assets 170,330 49,768 16,563 9,889 10,168 256,718
Non-current assets 3/ 1,575 570 23 38 2 2,208
31 Mar 2008
Total assets before goodwill 165,837 47,670 11,667 8,817 11,621 245,612
Goodwill on consolidation 192 5,649 - - - 5,841
Total assets 166,029 53,319 11,667 8,817 11,621 251,453
Non-current assets 3/ 1,546 555 12 29 4 2,146
Notes:
1/ Expenses, allowances for credit and other losses and profits exclude one-time items
2/ Refer to sections on Customer Loans and Non-Performing Assets and Loss Allowance Coverage for more information on business segments 3/ Includes investment in associates, properties and other fixed assets, and investment properties
The performance by geography is classified based on the location in which income and assets are recorded.
Singapore
Net profit fell to $259 million from $282 million in the previous quarter and $347 million a year ago. The results reflected weaker economic conditions as net interest income was affected by lower market interest rates and higher general allowances were taken.
Net interest income fell 12% from the previous quarter as lower market interest rates reduced yields on corporate loans, interbank assets and securities without effecting a similar decline in deposit costs. An improvement in loan credit spreads was not sufficient to compensate fully.
Non-interest income was significantly better than the previous quarter due mainly to strong trading gains in foreign exchange and interest rate activities. Fee income also improved as higher investment banking and loan syndication revenues were partially offset by lower trade and remittances and credit card transactions.
Expenses were stable from the previous quarter as lower non-staff costs were offset by higher bonus accruals in line with the stronger revenues.
The increase in allowances from the previous quarter was due mainly to the increase in general allowances. Specific allowances were little changed.
Hong Kong
The first quarter’s results incorporate a depreciation of the Singapore dollar against the Hong Kong dollar of 3%
from the previous quarter and 10% from a year ago. The results occurred against the backdrop of a softer economy.
Net profit rose to $94 million from $16 million in the previous quarter but was half the $180 million a year ago. Compared to the previous quarter, revenues rose 5% from higher treasury contributions while expenses and provisions declined 27% and 21% respectively.
Net interest income was slightly higher than the previous quarter as interest margins improved 9 basis points to 1.91% with a widening of prime-Hibor spreads and better loan pricing being partially offset by lower yields on Hibor-linked assets, including surplus funds.
Non-interest income rose 11% from the previous quarter from stronger corporate customer flows for foreign exchange hedging products and from higher trading gains. Fee income fell moderately from lower
stockbroking commissions in line with market turnover and from lower trade and remittance revenues. Their impact was partially offset by higher loan syndication fees. Fee income from investment banking and wealth management continued to be weak.
Expenses fell 27% from the previous quarter due to tighter spending on controllable expenditure, including advertising and travel.
CUSTOMER LOANS 1/
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
Gross 132,784 128,365 115,660
Less:
Specific allowances 1,051 868 437
General allowances 1,176 1,016 996
Net total 130,557 126,481 114,227
By business unit
Consumer Banking 35,237 34,758 31,116
Institutional Banking 91,184 87,415 77,915
Others 6,363 6,192 6,629
Total (Gross) 132,784 128,365 115,660
By geography
Singapore 74,981 74,377 67,294
Hong Kong 32,814 32,085 29,423
Rest of Greater China 9,439 9,683 6,916
South and South-east Asia 7,920 5,557 5,198
Rest of the world 7,630 6,663 6,829
Total (Gross) 132,784 128,365 115,660
By industry
Manufacturing 16,946 15,958 15,457
Building and construction 18,786 17,931 14,403
Housing loans 29,882 29,375 26,581
General commerce 12,426 13,075 11,057
Transportation, storage & communications 13,073 12,457 11,511
Financial institutions, investment & holding companies 16,988 14,490 14,236
Professionals & private individuals (except housing loans) 10,346 10,478 10,022
Others 14,337 14,601 12,393
Total (Gross) 132,784 128,365 115,660
By currency and fixed/variable pricing
Singapore dollar 56,469 53,527 45,902
Fixed rates 17,628 15,795 11,769
Floating or adjustable rates 38,841 37,732 34,133
Hong Kong dollar 30,272 29,347 26,344
Fixed rates 680 664 608
Floating or adjustable rates 29,592 28,683 25,736
US dollar 29,194 28,123 27,406
Fixed rates 1,686 1,736 1,992
Floating or adjustable rates 27,508 26,387 25,414
Others 16,849 17,368 16,008
Fixed rates 2,436 2,695 2,711
Floating or adjustable rates 14,413 14,673 13,297
Total (Gross) 132,784 128,365 115,660
Note:
1/ Includes customer loans classified as financial assets at fair value through profit or loss on the balance sheet
Gross customer loans rose 3% from the previous quarter. Excluding currency translation effects, the growth was due largely to Singapore-dollar corporate borrowing for infrastructure projects. DBS increased its market share of Singapore-dollar loans from 20% in the previous quarter to 21%.
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
NON-PERFORMING ASSETS AND LOSS ALLOWANCE COVERAGE 1/
By business unit
NPA ($m)
SP ($m)
GP ($m)
NPL (% of loans)
(GP+SP)/NPA (%)
(GP+SP)/ unsecured NPA (%) 31 Mar 2009
Consumer Banking 326 81 351 0.9 133 289
Institutional Banking 2,028 830 904 2.2 86 144
Others 367 204 (79) 5.8 34 48
Total non-performing
loans (NPL) 2,721 1,115 1,176 2.0 84 142
Debt securities 293 251 338 - 201 216
Contingent liabilities &
others 219 54 213 - 122 202
Total non-performing
assets (NPA) 3,233 1,420 1,727 - 97 156
31 Dec 2008
Consumer Banking 290 76 347 0.8 146 311
Institutional Banking 1,467 684 867 1.7 106 169
Others 201 160 (198) 3.3 (19) (23)
Total non-performing
loans (NPL) 1,958 920 1,016 1.5 99 159
Debt securities 277 236 288 - 189 193
Contingent liabilities &
others 157 52 220 - 173 421
Total non-performing
assets (NPA) 2,392 1,208 1,524 - 114 176
31 Mar 2008
Consumer Banking 229 62 311 0.7 163 379
Institutional Banking 897 378 775 1.2 129 235
Others 62 53 (32) 0.9 34 41
Total non-performing
loans (NPL) 1,188 493 1,054 1.0 130 242
Debt securities 167 160 182 - 205 212
Contingent liabilities 109 7 130 - 125 344
Total non-performing
assets (NPA) 1,464 660 1,366 - 138 241
Note:
By geography
South and South-east
Asia 184 72 183 1.7 139 181
South and South-east
Asia 133 59 159 1.2 164 171
Singapore 494 227 425 0.8 132 255
Hong Kong 419 186 284 1.5 112 202
Rest of Greater China 76 28 94 0.9 159 438
South and South-east
Asia 65 42 137 0.8 275 339
Rest of the World 134 10 114 1.2 93 173
Total non-performing
loans 1,188 493 1,054 1.0 130 242
Debt securities 167 160 182 - 205 212
Contingent liabilities
& others 109 7 130 - 125 344
Total non-performing
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
By industry
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
NPA SP NPA SP NPA SP
Manufacturing 824 381 720 351 328 156
Building and construction 258 44 96 30 73 18
Housing loans 214 42 193 43 145 32
General commerce 472 226 381 187 273 138
Transportation, storage & communications
29 7 24 6 8 4
Financial institutions, investment & holding companies
433 141 145 66 114 9
Professionals & private individuals (except housing loans)
299 151 223 129 127 56
Others 192 123 176 108 120 80
Total non-performing loans 2,721 1,115 1,958 920 1,188 493
Debt securities 293 251 277 236 167 160
Contingent liabilities & others 219 54 157 52 109 7
Total non-performing assets 3,233 1,420 2,392 1,208 1,464 660
By loan classification
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
NPA SP NPA SP NPA SP
Non-performing assets
Substandard 1,931 219 1,328 213 846 63
Doubtful 950 849 800 730 373 351
Loss 352 352 264 265 245 246
Total 3,233 1,420 2,392 1,208 1,464 660
Restructured assets
Substandard 282 61 213 46 171 22
Doubtful 61 51 57 49 30 27
Loss 44 44 49 46 37 37
Total 387 156 319 141 238 86
By collateral type
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
NPA NPA NPA
Unsecured non-performing assets 2,018 1,554 842
Secured non-performing assets by collateral type
Properties 817 556 385
Shares and debentures 121 43 19
Fixed deposits 18 16 9
Others 259 223 209
By period overdue
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
NPA NPA NPA
Not overdue 1,107 857 559
<90 days overdue 589 463 284
91-180 days overdue 495 326 108
>180 days overdue 1,042 746 513
Total 3,233 2,392 1,464
Non-performing loans rose 39% from the previous quarter to $2.72 billion or 2.0% of the loan portfolio, with SME loans in Hong Kong and corporate loans in Rest of the World accounting for the majority of the increase. Including debt securities and contingent liabilities, non-performing assets amounted to $3.23 billion, of which 34% were still current in principal and interest and were classified for prudent reasons.
Allowance coverage for non-performing assets decreased to 97% from 114% in the previous quarter. If collateral was considered, the coverage was 156%.
FUNDING SOURCES
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
Customer deposits 1/ 179,818 169,858 157,379
Interbank liabilities 2/ 12,327 9,571 21,376
Other borrowings and liabilities 2/ 57,065 57,470 51,848
Shareholders’ funds 24,042 19,819 20,850
Total 273,252 256,718 251,453
Notes:
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
CUSTOMER DEPOSITS 1/
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
By currency and product
Singapore dollar 98,356 93,957 88,440
Fixed deposits 19,692 20,645 27,523
Savings accounts 65,803 62,068 49,772
Current accounts 12,198 10,359 10,512
Others 663 885 633
Hong Kong dollar 25,147 23,536 22,706
Fixed deposits 15,579 15,721 15,402
Savings accounts 6,537 5,030 4,618
Current accounts 2,702 2,211 1,904
Others 329 574 782
US dollar 30,615 28,247 27,489
Fixed deposits 19,926 19,365 18,688
Savings accounts 2,607 2,040 1,791
Current accounts 7,309 5,982 4,772
Others 773 860 2,238
Others 25,700 24,118 18,744
Fixed deposits 20,693 20,043 13,653
Savings accounts 1,441 1,231 683
Current accounts 2,295 2,178 2,164
Others 1,271 666 2,244
Total 179,818 169,858 157,379
Fixed deposits 75,890 75,774 75,266
Savings accounts 76,388 70,369 56,864
Current accounts 24,504 20,730 19,352
Others 3,036 2,985 5,897
Note:
1/ Includes customer deposits classified as financial liabilities at fair value through profit or loss on the balance sheet
Customer deposits rose 6% from the previous quarter to $179.8 billion. Excluding exchange translation effects, the increase was largely due to Singapore-dollar savings and current account deposits.
Hong Kong-dollar deposits rose 1% in local currency terms during the quarter, also due to savings and current accounts.
The Group’s deposit mix improved further during the quarter, with savings and current accounts generally rising across currencies.
OTHER BORROWINGS & LIABILITIES
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
Subordinated term debts1/ 9,539 9,085 8,704
Other debt securities in issue
Due within 1 year 310 263 974
Due after 1 year 502 375 366
Comprising:
Secured 2/ 419 333 425
Unsecured 393 305 915
Others 46,714 47,747 41,804
Total 57,065 57,470 51,848
Notes:
VALUE AT RISK AND TRADING INCOME
The Group uses a Value at Risk (VaR) measure as one mechanism for monitoring and controlling trading risk. The VaR is calculated using a one-day time horizon and a 99% confidence interval. The following table shows the period-end, average, high and low VaR for the trading risk exposure of the Group for the period from 1 April 2008 to 31 March 2009. The Group’s trading book VaR methodology is based on Historical Simulation VaR.
1 April 2008 to 31 March 2009
($m) As at 31 March 2009 Average High Low
Total 26 34 60 21
The charts below provide the range of VaR and the daily distribution of trading income in the trading portfolio for the
period from 1 April 2008 to 31 March 2009.
DBSH Group VaR for Trading Book
0
Daily Distribution of Group Trading Income (1 Apr 2008 to 31 Mar 2009)
Trading income (S$ million)
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
CAPITAL ADEQUACY
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
Tier 1
Share capital 8,423 4,215 4,178
Disclosed reserves and others 20,429 20,180 18,289
Less: Tier 1 Deductions (6,034) (6,022) (5,999)
Eligible Tier 1 22,818 18,373 16,468
Tier 2
Loan allowances admitted as Tier 2 734 656 583
Subordinated debts 6,901 6,571 6,890
Revaluation surplus from equity securities 16 27 100
Less: Tier 2 Deductions (112) (106) (114)
Total eligible capital 30,357 25,521 23,927
Risk-weighted assets 181,875 182,685 178,678
Capital adequacy ratio (%)
Tier 1 ratio 12.5 10.1 9.2
Tier 2 ratio 4.2 3.9 4.2
Total (Tier 1 & 2) ratio 16.7 14.0 13.4
The Group’s capital adequacy ratio rose from 14.0% (Tier 1 at 10.1%) in the previous quarter to 16.7% (Tier 1 at 12.5%) due primarily to the rights issue in January 2009.
UNREALISED VALUATION SURPLUS/(LOSSES)
($m) 31 Mar 2009 31 Dec 2008 31 Mar 2008
Properties 513 532 677
Financial investments (321) (246) (29)
Total 192 286 648
Unaudited Consolidated Income Statement
Net (loss)/income from financial instruments designated at fair value (54) 85 NM (169) 68
Net income from financial investments 106 211 (50) 104 2
Other income 13 18 (28) 18 (28)
Total income 1,662 1,563 6 1,475 13
Expenses
Employee benefits 327 352 (7) 391 (16)
Depreciation of properties and other fixed assets 41 34 21 36 14
Other expenses 270 270 - 307 (12)
Allowances for credit and other losses 437 140 >100 316 38
Total expenses 1,075 796 35 1,050 2
Unaudited Consolidated Statement of Comprehensive Income
In $ millions
Other comprehensive income:
Foreign currency translation differences for foreign operations 135 (79) NM (47) NM
Share of other comprehensive income of associates 6 (19) NM (16) NM
Available-for-sale financial assets
Net valuation taken to equity (392) (97) (>100) (225) (74)
Transferred to income statement due to impairment - - - 5 NM
Transferred to income statement on sale (112) (193) 42 (95) (18)
Tax on items taken directly to or transferred from equity 46 74 (38) 83 (45)
Other comprehensive income, net of tax (317) (314) (1) (295) (7)
Total comprehensive income 175 325 (46) 63 >100
Attributable to:
Shareholders 27 353 (92) (10) NM
Minority interests 148 (28) NM 73 >100
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
Unaudited Balance Sheets
GROUP COMPANY
31 Mar 31 Dec 31 Mar 31 Mar 31 Dec 31 Mar Singapore Government securities and treasury bills 14,312 14,797 17,604
Due from banks 28,331 20,467 26,874
Financial assets at fair value though profit or loss 2/ 10,890 9,401 17,675
Positive replacement values for financial derivatives 30,153 32,328 23,053 Loans and advances to customers 129,936 125,841 113,624
Financial investments 25,025 22,782 21,264
Securities pledged 1,181 997 2,345
Subsidiaries - - - 10,959 6,745 6,758
Investments in associates 640 604 656
Goodwill on consolidation 5,847 5,847 5,841
TOTAL ASSETS 273,252 256,718 251,453 11,058 6,899 6,758
LIABILITIES
Due to banks 11,839 9,021 20,590
Due to non-bank customers 174,914 163,359 150,558 Financial liabilities at fair value through profit or loss 3/ 9,492 11,282 15,062
Negative replacement values for financial derivatives 29,406 31,918 22,534
Bills payable 870 714 499
Current tax liabilities 822 779 925
Deferred tax liabilities 46 45 97
Other liabilities 7,183 5,874 7,687 3 5 4
Other debt securities in issue 812 638 1,340
Subordinated term debts 9,539 9,085 8,704
TOTAL LIABILITIES 244,923 232,715 227,996 3 5 4
NET ASSETS 28,329 24,003 23,457 11,055 6,894 6,754
EQUITY
Share capital 8,423 4,215 4,178 8,423 4,215 4,178
Treasury shares (120) (154) (105) - - (30)
Other reserves 5,870 6,322 7,435 43 89 37
Revenue reserves 9,869 9,436 9,342 2,589 2,590 2,569
SHAREHOLDERS’ FUNDS 24,042 19,819 20,850 11,055 6,894 6,754
Minority interests 4,287 4,184 2,607
TOTAL EQUITY 28,329 24,003 23,457 11,055 6,894 6,754
OFF BALANCE SHEET ITEMS
Contingent liabilities and commitments 99,438 92,656 101,793 Financial derivatives 1,697,178 1,704,717 1,937,019
OTHER INFORMATION
Net asset value per ordinary share ($)
(i) Based on existing ordinary share capital 4.74 4.48 4.39
(ii) Assuming conversion of outstanding preference
shares to ordinary shares 4.64 4.34 4.26
Notes: 1/ Audited
Unaudited Consolidated Statement of Changes in Equity
Draw-down of reserves upon vesting of
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
Unaudited Consolidated Cash Flow Statement
In $ millions
1st Qtr 2009
1st Qtr
2008 1/
Cash flows from operating activities
Net profit for the year 492 639
Adjustments for non-cash items:
Allowances for credit and other losses 437 140
Depreciation of properties and other fixed assets 41 34
Share of profits of associates (20) (23)
Net gain on disposal of properties and other fixed assets - (3)
Net gain on disposal of financial investments (106) (211)
Income tax expense 115 151
Profit before changes in operating assets & liabilities 959 727
Increase/(Decrease) in:
Due to banks 2,818 5,126
Due to non-bank customers 11,555 5,190
Financial liabilities at fair value through profit or loss (1,790) (3,180)
Other liabilities including bills payable (554) 10,223
Debt securities and borrowings 131 242
(Increase)/Decrease in:
Change in restricted balances with central banks (447) (379)
Singapore Government securities and treasury bills 485 (2,171)
Due from banks (7,864) (3,568)
Financial assets at fair value through profit or loss (1,489) 1,868
Loans and advances to customers (4,460) (7,424)
Financial investments (2,215) (2,155)
Other assets 837 (10,042)
Tax paid (73) (105)
Net cash used in operating activities (1) (2,107) (5,648)
Cash flows from investing activities
Dividends from associates 19 35
Purchase of properties and other fixed assets (49) (14)
Proceeds from disposal of properties and other fixed assets 4 2
Net cash (used in)/generated from investing activities (2) (26) 23
Cash flows from financing activities
Increase in share capital and share premium 4,208 14
Purchase of treasury shares (21) -
Dividends paid to minority interests (45) (41)
Net cash provided by/(used in) financing activities (3) 4,142 (27)
Exchange translation adjustments (4) 46 (17)
Net change in cash and cash equivalents (1)+(2)+(3)+(4) 2,055 (5,669)
Cash and cash equivalents at 1 January 12,678 15,953
Cash and cash equivalents at 31 March 14,733 10,284
Note:
Additional Information
ISSUANCE OF ORDINARY SHARES
(a) The movement in the number of issued and fully paid-up ordinary shares for the first quarter ended 31 March 2009
is as follows:
At 1 January 2009 1,520,960,458
Issue of rights shares 760,480,229
At 31 March 2009 2,281,440,687
Weighted average number of shares for first quarter 2009
- ordinary shares 2,036,397,058
- fully diluted 2,136,290,773
The fully diluted shares took into account the effect of a full conversion of non-voting convertible preference shares (CPS) and non-voting redeemable CPS, and the exercise of all outstanding share options granted to employees when such shares would be issued to a price lower than the average share price during the period.
On 30 January 2009, the Group issued 760,480,229 rights shares on the basis of one rights share for every two ordinary shares held on 31 December 2008.
(b) New ordinary shares that would have been issued on conversion of preference shares and exercise of share option are as follows:
(Number) 31 Mar 2009 31 Dec 2008 31 Mar 2008
Conversion of non-voting CPS 180,654 120,436 120,436
Conversion of non-voting redeemable CPS 99,713,061 66,475,374 66,475,374
Exercise of share options 16,844,741 14,373,192 16,674,753
(c) The movement in the number of treasury shares for the first quarter ended 31 March 2009 is as follows:
At 1 January 2009 8,112,401
Purchase of treasury shares 3,871,658
Vesting of performance shares (3,783,349)
At 31 March 2009 8,200,710
ADOPTION OF NEW OR REVISED FRS AND INT FRS
FRS 1: Presentation of Financial Statements
The amended FRS 1 separates owner and non-owner changes in equity and introduces the statement of comprehensive income. The statement of comprehensive income presents all items of income and expense recognised in profit or loss, together with all other items of unrecognised income and expense, such as available-for-sale revaluation reserves, capital reserves, etc. The adoption of the revised FRS 1 creates additional disclosure requirements for the Group’s financial statements.
FRS 27: Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
The standard removes the requirement to differentiate pre-acquisition from post-acquisition dividends. Dividends received will be treated as revenue. The changes introduced are to be applied prospectively and will affect how dividends received in the future are accounted for.
FRS 107: Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments
The amendments to FRS 107 are intended to enhance disclosures on fair value measurement and liquidity risk. The adoption of the revised FRS 107 creates additional disclosure requirements for the Group’s financial statements.
FRS 108: Operating Segments
FRS 108 replaces a current accounting standard, FRS 14 – Segment Reporting. FRS 108 introduces the management approach to segment reporting and a single set of operating segments will replace the primary and secondary segments. Information reviewed by the chief operating decision-maker will determine the segments, the measure of segment
performance and disclosures. The adoption of FRS 108 creates additional disclosure requirements for the Group’s financial statements.
DBS GROUP HOLDINGS LTD AND ITS SUBSIDIARIES
DISCLOSURE ON CERTAIN FINANCIAL INSTRUMENTS
At the request of the G7 Finance Ministers and Central Bank Governors, the Financial Stability Forum issued a report in April 2008 on enhancing market and
institutional resilience. Among its recommendations, it
encouraged enhanced disclosure of certain financial instruments. The following disclosures are made in keeping with these developments.
COLLATERALISED DEBT/LOAN OBLIGATIONS (CDO)
Type of CDO
31 Mar 2009 31 Dec 2008 31 Mar 2008
($m) Exposure Allowance Exposure Allowance Exposure Allowance
Investment Portfolio
1,012 520 1,056 459 1,134 282
ABS CDO 276 257 264 246 259 232
Non-ABS CDO 736 263 792 213 875 50
CLO 706 243 691 193 709 30
Other CDOs 30 20 101 20 166 20
Trading Book 218 - 206 - 303
-Total 1,230 520 1,262 459 1,437 282
Moody’s Ratings
Type of CDO Aaa Aa A Baa Ba to B Caa to Ca Not Rated by
Standard & Poor’s Ratings
Type of CDO AAA AA A BBB BB to B CC Not Rated by
S&P (rated by the other)
The CDO portfolio comprised $276 million asset-backed (ABS) CDOs and $736 million non-ABS CDOs in the investment portfolio, and $218 million of CDOs in the trading portfolio.
The ABS CDOs have mortgage-backed securities (such as US sub-prime mortgages, Alt-A mortgages and ABS CDO tranches) as one of their asset classes, the percentage of which differs among the CDOs. By vintage, 35% of these CDOs were issued in 2004 or earlier, 59% in 2005 and 6% in 2006 or later. These ABS CDOs are at least 90% covered by allowances since fourth quarter 2007.
Of the non-ABS CDOs in the investment portfolio, a portion was in collateralised loan obligations (CLOs), which have corporate loans as their dominant underlying collateral. The other CDOs have either credit default swaps or trust preferred securities as their dominant underlying collateral.
Allowances totalling $263 million or 36% of the portfolio
have been made for the non-ABS investment CDOs,of
which 75% are rated Baa or above under Moody’s revised methodology.
The CDOs in the trading portfolio, which are designated at
fair value, were valued at $218 millioncompared to $206
OTHER US SUB-PRIME AND ALT-A EXPOSURE
The Group does not have direct exposure to US sub-prime mortgages and Alt-A mortgages other than through its ABS CDOs as disclosed above.
COMMERCIAL MORTGAGE-BACKED SECURITIES
The Group had $78 million of investments in commercial mortgage-backed securities, representing less than 0.1% of the
Group’s total assets. By geography, 77% were in Singapore and 23% were in Hong Kong.By industry, retail accounted
for 27% of the portfolio, commercial-cum-retail 59% and industrial 14%.All the securities are rated A or above by Moody’s
or Standard & Poor’s or both, with 88.5% rated AA or higher.
LEVERAGED FINANCE
Leveraged finance is defined in this disclosure as acquisition financing sponsored by funds (private equity or investment) and supported by leverage. The Group’s exposure to such loans, amounting to $513 million, represented less than 0.2% of its total assets. Of the exposure, 4% was in Singapore, 45% in Rest of Greater China, 30% in South and South-East Asia, and the remaining 21% in other parts of Asia. By industry, they were primarily in finance, media, information technology services and manufacturing.
SPECIAL PURPOSE ENTITIES (SPE)
The list of material operating SPEs is summarised in the following table, all of which are involved in the issuance or distribution of structured investment products. None of the SPEs has any liquidity facility with the Group.
SPE Description Collateral Risk Factors
Constellation Investment Ltd (incorporated in Cayman Islands)
• 100% consolidated under INT FRS12 Consolidation-SPE
• SPE activity: Issuance of structured equity/credit-linked notes to
clients
• SPE size: $0.6 billion
• Group’s role: Arranger, Market Agent, Calculation Agent,
Custodian for assets held as collateral, Swap Counterparty
Cash deposits, Hong Kong government securities, structured notes from Zenesis SPC (collateral rated AAA to BB- by Fitch or S&P)
Investment product risk is borne by clients. Should the structured notes be redeemed early and the unwind cost of the structure be larger than the early redemption value of the collateral, the Group may have to bear the difference
Zenesis SPC (incorporated in Cayman Islands)
• 100% consolidated under INT FRS12 Consolidation-SPE
• SPE activity: Issuance of rated credit-linked notes to
Constellation Investment Ltd and rated/unrated notes to other clients
• SPE size: $0.5 billion
• Group’s role: Calculation Agent, Substitution Agent, Swap
Counterparty
Cash deposits, Corporate bond (rated AA- by S&P), FSA-guaranteed bonds
